The latest data released by the Office for National Statistics (ONS) has revealed that the increase in house prices in the year to July grew 2.2%. It is the fifth consecutive month of recorded annual increases. The previous month’s data revealed a 2.7% annual increase, but last year as interest rates remained high and inflation was taking a toll on the economy, the housing market had less buyer demand. Prior to the five consecutive months of house price increase, the ONS had reported eight consecutive months of annual house price declines. The average house price is now £290,000.

The monthly increase for July amounted to an increase of 0.6%.

The ONS house price index is considered to be the most thorough overall data release. While others take into account perhaps only mortgaged house sales, or purchases through their own organization, the ONS uses data from sold properties recorded by the Land Registry. It includes both mortgaged and cash purchases.

The UK housing market is expected to continue experiencing renewed attention from home buyers. Some of the increased demand is likely from hopeful home buyers once shut out of the market due to higher interest rates. Now, they are taking another chance on finding a way onto the property ladder as interest rates have dropped and estate agents are emphasizing the need for homeowners selling their property to price it properly.

It has been reported that homes overpriced and then reduced spend months more on the market waiting to find a buyer than those priced sensibly.

The interest rates offered now are incredibly low considering the Bank of England’s Monetary Policy Committee (MPC) recently cut the standard base interest rate on 1 August. It was the first cut to the base rate since March 2020. The majority vote by the committee to reduce the rate was by 0.25% to a new rate of 5.0%. 

However, lenders began lowering their rates weeks before the MPC meeting in August and have continued to do so with some mortgage offers now below 4.0%. The opportunity to borrow at such a cheap rate has awakened interest in the housing market. With mortgage rates offered below the current base rate, home buyers might be able to secure an interest rate reflective of a base rate much lower than the one currently as if the MPC had voted for another rate cut.

The higher demand in the housing market is good news for the economy. There are many businesses that are dependent on people buying a home, moving home, downsizing, and becoming a landlord. From moving helpers to skilled workers focused on home improvements and upgrades, to furniture sellers, interior designers, painters, landscapers and others. The economy is helped when the housing market is healthy. 

Homeowners also benefit when the housing market is active. As buyers come into the market the demand creates an increase in property values. Not all areas will experience the same increases, but overall if the market is strong, most could see an increase in their property values. 

This can be beneficial to a homeowner seeking a remortgage as their loan to value or LTV ratio will be lower and it could give them access to better interest rate offers than if they have a higher LTV ratio. Building equity in a home can happen many ways, through upgrades made to the property, paying down debt, or the easiest way is sitting back and watching one’s property value increase due to demand from buyers. 

The economy is helped along by an active housing market, homeowners are as well, and even sellers and buyers. As the market becomes more active, sellers will be motivated to bring their property to the market and an increase in supply helps keep house prices from skyrocketing as home buyers have more options.

As rates continue to slide down, more opportunities will be available to home buyers and homeowners. How long lenders continue to be competitive for business is unknown, for things could change drastically for a number of reasons, even due to political issues domestically or internationally as something could shake our recovering economy causing lenders to become cautious and pull back their unexpectedly low rates quickly.

For now, the housing market seems to be on a good strong steady pace of growth. For home buyers and homeowners seeking deals and cheap borrowing, the time is one of the best in years to borrow and save money.